More than 1.5m employers will be told by the taxman this week that time is
running out for them to be prepared for the biggest reform in business tax
since the start of PAYE 70 years ago.

HM Revenue & Customs says the programme is on track and “going well” but there is concern that many businesses are either unaware or are not prepared for the upheaval and that there will be more than the usual teething problems associated with major data changes.

The introduction of Real Time Information in April means every employer will have to provide more information about tax and National Insurance deductions. They will have to send details to HMRC every time they pay an employee at the time any payment is made.

The taxman is hoping to reduce a £3bn payments backlog. However, research shows that the full implications have yet to register with many companies.

A Federation of Small Businesses survey of 1,700 members showed a quarter did not know about the changes and only 16pc were prepared.

Business adviser David Heaton of tax firm Baker Tilly is questioning estimates about the size of savings and points out that many micro-businesses do not use computers, now essential to cope with the reforms.

HMRC wants to have the new set-up, which is linked to the introduction of the new Universal Credit system, bedded in by October followed by a penalty regime for late or inaccurate filing.

HMRC says the update to PAYE will mean the system is quicker, easier and more accurate, and will make it easier to detect fraud and errors and save hundreds of millions of pounds.

Businesses will save £300m in reduced administration costs when the system is up and running, according to HMRC estimates, but many will be faced with overhauling systems and extra software investment. Businesses with up to nine employees will qualify for free software.

HMRC insists that there will be benefits from simpler reporting requirements and the abolition of the extensive annual tax return.

Revenue records will be more accurate, helping to reduce tax dispute cases, says HMRC, which is banking on the earlier inflow of £3bn in tax currently not paid until the end of the financial year.

All payments to employees will have to be reported, no matter how small, along with the details about working hours.All payments to employees will have to be reported, no matter how small, along with the details about working hours.